LONDON, May 8 AstraZeneca shares gained
2 percent on Thursday on speculation that U.S. drugmaker Pfizer
was about to return with a higher bid worth more than 53
pounds ($89.9) a share, traders said.

A bid at that level would value Britain's second-biggest
pharmaceuticals group at around $113 billion.

Pfizer's pursuit of AstraZeneca in potentially the biggest
ever foreign takeover of a British firm has provoked a political
storm, with Prime Minister David Cameron demanding Pfizer give
stronger guarantees it will keep jobs and investment in the
country.

Pfizer's previous approach, which was promptly rejected by
the AstraZeneca board, initially valued the group at $106
billion - but the value of that cash-and-stock offer has since
slipped because of a fall in Pfizer shares following weak
quarterly results.

A stock market report in the Daily Mail newspaper said many
investors believed Pfizer was working with its advisers on a
"knockout offer" of more than 53 pounds per share that would be
made by the weekend.

"The deal is not there, but it's not off the table either,"
Dafydd Davies, senior trader at London-based Prime Wealth Group,
said.

Pfizer Chief Executive Ian Read is heading to London next
week to lay out his case for a merger in front of two
parliamentary committees on May 13 and 14.

A Pfizer spokesman had no comment on the company's bid
plans.

Investors are betting that a deal will get done, despite the
political noise. "One way or another, I think the deal will go
ahead," said Beaufort Securities sales trader Basil Petrides.

Analysts at Barclays, who believe Pfizer could make the deal
pay at any price up to 56 pounds a share, said in a note to
clients last Friday that AstraZeneca shares could fall 21
percent if the U.S. company walked away.

AstraZeneca laid out a defence strategy on Tuesday by
flagging up the potential of a range of promising experimental
medicines that it said would boost sales by three quarters over
the next decade.

Chief Executive Pascal Soriot and his management team are
now following up with a series of meetings with leading
shareholders to get their feedback. The British group has not
ruled out a deal altogether and people familiar with the matter
said it was willing to talk if there was a compelling offer.

Soriot, who is credited with reviving the company's drug
pipeline, has won the support of a number of investors,
including leading shareholder Investor, which owns
4.1 percent and has had a stake in legacy firm Astra since 1924.
Investor's Marcus Wallenberg also sits on the drugmaker's board.

Several other large shareholders, however, have told Reuters
they would favour engagement with Pfizer to secure a higher
offer.
($1 = 0.5894 British Pounds)
(Reporting by Sudip Kar-Gupta and Ben Hirschler; Editing by
Erica Billingham)

* a source told Reuters on Friday the European Central Bank
had rejected a request by the bank for more time to raise
capital
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